Zcash May Have a Bigger Role to Play as AI Threatens Financial Privacy: Grayscale

As AI improves blockchain address labelling, Grayscale sees Zcash becoming more valuable for users.

Artificial intelligence could usher in a new wave of concern over financial privacy, according to a Grayscale research report. The firm’s Head of Research, Zach Pandl, expects AI to create new privacy threats and drive demand for new solutions.

He sees Zcash as one potential option.

Zcash For Blockchain Privacy

Public attention to financial privacy has historically increased alongside major technological changes. The first wave came in the 1970s, when computers enabled the digitization and automation of financial record-keeping. A second wave followed in the 1990s with the expansion of the Internet and growing concerns over online privacy.

Grayscale believes a third wave has now begun as AI becomes more widely used. Pandl said AI tools are likely to create new privacy challenges across the economy, and the issue is particularly pressing for public blockchains that are transparent by default.

For instance, on the Bitcoin network, every transaction is recorded on a public ledger and can be viewed by anyone. When blockchain activity is linked with off-chain information, user addresses could potentially be de-anonymized, a risk also noted in the Bitcoin white paper.

While that risk existed before AI, Grayscale said advances in the technology could make blockchain address labeling more effective and widely available, increasing the need for privacy protection. Unlike Bitcoin, Zcash offers additional privacy features through shielded transactions, which use zero-knowledge cryptography to conceal both the addresses involved in a transaction and the amount being transferred. Grayscale said this privacy feature could become a “must-have” for users who prioritize financial privacy.

Grayscale had made a similar point earlier, while noting that ZEC had surged about 20 times in the past year but was still worth less than 1% of Bitcoin’s market cap. The firm said Zcash’s privacy features and other advantages may not be fully reflected in its current valuation, which leaves room for further gains.

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The comments come days after Grayscale converted its Zcash Trust, launched in 2017, into a spot ZEC ETF. The fund began trading on the NYSE Arca on August 25.

$1,800 Target

ZEC has posted a strong performance. The privacy-focused crypto asset gained nearly 80% over the past month alone. Following the sharp rally, ZEC is trading around $850, but crypto analyst Ali Martinez is betting on further upside.

He said that “Zcash is about to melt faces,” while identifying $1,800 as the “first stop.”